Ready to invest? Your questions, answered

10 August 2017
by
National Bank

Think you might be ready to invest? Here are five questions to ask
yourself before jumping in.

Whether you’re starting a project or planning your retirement, you
need money. And if you want it to grow rather than lie dormant in a
bank account, your best bet is to invest it. Do you have questions?
Worried that this might not be the best solution for you, or that you
might lose everything? Annamaria Testani, Vice President, National
Sales at National Bank Investments, answers your questions.

Is this the right time to invest?

It’s always the right time to invest! You can start to make
investments as soon as you have a project in mind. Ideally, you’d
invest with a goal: to buy a car, plan your retirement or accumulate a
down payment for a property, for example.

But there’s no one way to do it, which is why it’s a good idea to
meet with a financial advisor who can propose personalized solutions,
adapted to your needs. He will analyse your situation and help you
make the best choices based on your revenue, tax rate, budget, debts,
etc. You should know that it’s often preferable to pay off high
interest debts before thinking about investing the money you’ve
managed to save. For example, with interest rates as high as 19.9%,
liquidating your credit card debts will win you immediate surplus.

How can I invest if I don’t have a lot of liquidity?

You don’t need to be rolling in money to start investing. A few hundred dollars is enough to get started.
A financial advisor can help you make the right choices, even with a
small budget. Don’t forget: time plays in your favour, and small
investments made regularly over the long term can have big returns.

If you’re a more experienced investor and know your risk tolerance
and investment goals, a hybrid approach that combines the assistance
of an advisor with discount brokerage could be profitable. The best of
both worlds!

Another option? Online brokerage, which lets you manage your
portfolio yourself online. Because you don’t get the benefit of an
advisor’s guidance, online brokerage is usually less expensive.
Although it’s important to have a good knowledge of the market, many
sites offer tools to help investors who are just starting out.

I have a project in mind. How do I choose the right investment
strategy to make it happen?

Ideally, you would choose your investment strategy based on your
goals. To do that, you need to factor in your timelines: is it a
short-, medium- or long-term project? You also have to look at the
stage of life you’re in. For example, if you’re young and want to save
for retirement, you might be inclined to take more risks with your
investments, because you have many years in front of you to compensate
for fluctuations in the market.

If you’re looking for stable returns, you might opt for more
conservative investments instead.

You also need to ask yourself whether, if you need to, you’ll be able
to liquidate your investments quickly. Here, too, the investment
products you should choose can differ. Each strategy should be
personalized, so ask for professional advice!

Is the stock market the right place for me to invest?

It all depends on your objectives, your stage of life and your risk
tolerance. If you’re worried about investing in the stock market
because you think it’s too risky, know that over the long term, the
stock market usually provides good returns. Of course, there could be
periods of turbulence where things seem to be going badly, but if you
set your sights on the long term, it’s possible to get good results.

In addition, there are investment strategies and ways of building
your portfolio that allow you to better weather the ups and downs of
the market. Remember that stock market fluctuations are normal, and no
reason to run away. You should see these investments as a tool to
generate revenue that will grow with a long-term investment horizon.

Conversely, you should never expect the stock market to pay out like
a slot machine. Rapid gains of 10 to 20% are usually the result of
pure luck. No investor, no matter how experienced, has a crystal ball…

Is it possible to limit the risks that come with investing?

A key way to keep your investment portfolio stable is to diversify
your investments. It’s no secret: if you want to reduce your level of
risk and still get a good overall return, don’t put all your eggs in
one basket!

In other words, instead of focusing on a single type of investment,
spread your money across several. For example, Canadian and foreign
equities, bonds, term savings, dividend funds, etc. Ideally, you would
also vary your investment horizons (one, two, three, five years,
etc.), as well as your areas of investment (information technology,
biopharmaceuticals, aerospace, natural resources, etc.).

Safer investments, like bonds, allow you to stay the course in case
of market fluctuations, and compensate for negative returns on your stocks.

Of course, there are probably many other questions you’d like to ask.
For example, you might wonder which investment products are best for
your particular goals and stage of life, or maybe whether you should
be managing your portfolio yourself or would be better off going
through a brokerage firm, or which products are best suited to
mitigating the effects of market fluctuations on your investments…
Whatever your questions, speaking to a financial advisor will help
dissipate your doubts before you jump in.

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